PwC – LODGINGhttp://lodgingmagazine.com
Official Publication of AHLA. LODGING covers hotel news and hospitality industry stories.Thu, 24 May 2018 15:41:38 +0000en-UShourly1https://wordpress.org/?v=4.9.6PwC Forecasts Elevated Consumer Confidence, Lodging Demandhttp://lodgingmagazine.com/pwc-forecasts-elevated-consumer-confidence-lodging-demand/
http://lodgingmagazine.com/pwc-forecasts-elevated-consumer-confidence-lodging-demand/#respondThu, 25 May 2017 13:00:34 +0000http://lodgingmagazine.com/?p=31071New York–Encouraged by the prospect of a strengthening economy, U.S. lodging performance continued to improve in the first quarter of 2017 according to the updated lodging forecast by PwC. Despite a weak first quarter GDP growth estimate of 0.7 percent, lodging demand increased at the strongest quarterly rate since the first quarter of 2015, supporting modest growth in both occupancy and average daily rate (ADR). Overall, revenue per available room (“RevPAR”) increased 3.4 percent. Reinforced ...

]]>New York–Encouraged by the prospect of a strengthening economy, U.S. lodging performance continued to improve in the first quarter of 2017 according to the updated lodging forecast by PwC. Despite a weak first quarter GDP growth estimate of 0.7 percent, lodging demand increased at the strongest quarterly rate since the first quarter of 2015, supporting modest growth in both occupancy and average daily rate (ADR). Overall, revenue per available room (“RevPAR”) increased 3.4 percent.

Reinforced by rising employment, higher real income, and increased household net worth, consumer confidence and sentiment remain elevated. For the remainder of 2017, U.S. lodging performance is projected to temper, as peaking supply growth is expected to place increased pressure on pricing power. A shift in the supply-demand balance in 2018 is anticipated to result in the first annual decline in occupancy, albeit minor, since 2009. Average daily rate growth of 2.2 percent is expected to drive an increase in RevPAR of 2.0 percent, the slowest growth rate in nine years.

The updated estimates from PwC are based on a quarterly econometric analysis of the U.S. lodging sector, using an updated forecast released by IHS Markit and historical statistics supplied by STR and other data providers.

]]>http://lodgingmagazine.com/pwc-forecasts-elevated-consumer-confidence-lodging-demand/feed/0Surge in Consumer, Business Sentiment Suggests Momentum for 2017http://lodgingmagazine.com/surge-in-consumer-business-sentiment-suggests-momentum-for-2017/
http://lodgingmagazine.com/surge-in-consumer-business-sentiment-suggests-momentum-for-2017/#respondTue, 24 Jan 2017 14:18:46 +0000http://lodgingmagazine.com/?p=29219NEW YORK—The updated lodging forecast released today by PwC U.S. notes that strong industry performance in the fourth quarter of 2016, including encouraging trends in demand and average daily rate (ADR), coupled with a post-election surge in consumer and business sentiment that contributed to improving economic conditions, sets the stage for continued revenue per available room (RevPAR) growth in 2017. PwC expects the increase in supply of hotel rooms to marginally outpace growth in demand, ...

]]>NEW YORK—The updated lodging forecast released today by PwC U.S. notes that strong industry performance in the fourth quarter of 2016, including encouraging trends in demand and average daily rate (ADR), coupled with a post-election surge in consumer and business sentiment that contributed to improving economic conditions, sets the stage for continued revenue per available room (RevPAR) growth in 2017.

PwC expects the increase in supply of hotel rooms to marginally outpace growth in demand, resulting in a decline in occupancy to 65.3 percent. Aided by an expected increase in corporate transient demand, growth in average daily rate is expected to drive a RevPAR increase of 2.3 percent, according to the report.

PwC’s outlook is based on an economic forecast from IHS Markit, which expects real GDP to increase 2.3 percent in 2017, measured on a fourth-quarter-over-fourth-quarter basis, approximately 50 basis points higher than in PwC’s November forecast. Improving economic conditions are driven by a number of factors, including improving business and consumer confidence, and surging financial markets, as well as potential policy decisions related to tax cuts and changes to trade regulations.

The updated estimates from PwC are based on a quarterly econometric analysis of the US lodging sector, using an updated forecast released by IHS Markit and historical statistics supplied by STR and other data providers.

“Based on a strong fourth quarter, we are encouraged by the trends we are seeing as we head into 2017,” said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. “However, we remain cautiously optimistic, as higher-than-previously anticipated increase in demand is still expected to be offset by increasing supply through the year.”

]]>http://lodgingmagazine.com/surge-in-consumer-business-sentiment-suggests-momentum-for-2017/feed/0RevPAR Expected to Thrive in 2016http://lodgingmagazine.com/revpar-expected-to-thrive-in-2016/
http://lodgingmagazine.com/revpar-expected-to-thrive-in-2016/#respondWed, 27 Jan 2016 20:57:55 +0000http://lodgingmagazine.com/?p=22857Despite budding concerns in the financial markets and lower-than-expected growth in the fourth quarter, PricewaterhouseCoopers U.S. has released an updated lodging forecast expecting RevPAR to flourish, increasing by 5.5 percent in 2016. It will surpass the less-than-stellar increase in ADR, even as occupancy levels continue to improve upon its 35-year high due to strong corporate and leisure travel demand. This expected revenue is determined by a number of factors, such as the continued strong fundamentals ...

]]>Despite budding concerns in the financial markets and lower-than-expected growth in the fourth quarter, PricewaterhouseCoopers U.S. has released an updated lodging forecast expecting RevPAR to flourish, increasing by 5.5 percent in 2016. It will surpass the less-than-stellar increase in ADR, even as occupancy levels continue to improve upon its 35-year high due to strong corporate and leisure travel demand. This expected revenue is determined by a number of factors, such as the continued strong fundamentals of employment, wages, wealth, and the improving group demand. According to the report, industry fundamentals are solid heading farther into 2016, although the strength of the U.S. dollar could have a negative impact on gateway markets. To learn more about what the report predicts heading deeper into 2016, click here.

]]>NEW YORK—An updated lodging forecast released today by PwC US expects revenue per available room (RevPAR) growth in 2015 to be driven more by occupancy than previously expected, as average daily rate (ADR) growth continues to look for a firm footing. Recent performance of the lodging industry has surprised industry participants, as solid ADR growth has struggled despite peak occupancy levels, which was expected to have given operators the confidence to drive targeted price increases in many markets. As a result of continued pricing challenges, the outlook for 2015 is reduced moderately, to a RevPAR increase of 6.5 percent, driven by lower-than-previously-expected ADR growth. In 2016, PwC expects RevPAR to grow 5.7 percent, driven by ADR.

The estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers in October, and historical statistics supplied by STR and other data providers. Macroeconomic Advisers expects real gross domestic product (GDP) to increase 2.2 percent in 2015, followed by a 2.5 percent increase in 2016, measured on a fourth-quarter-over-fourth-quarter basis.

Based on this analysis and recent demand trends, which continue to be strong, industry occupancy in 2015 is expected to reach levels not seen since 1981, driven by a combination of strong demand momentum and a still-controlled supply environment. Despite peak occupancy levels, recent trends have pointed to continued pricing challenges as more significant ADR growth continues to defy expectations, even though many hotels in many markets are increasingly experiencing sell-out conditions. In 2016, supply growth is expected to accelerate to 1.9 percent, with the increase in available hotel rooms reaching the long-term average. As a result, while occupancy levels are expected to begin to stabilize, these peak levels, coupled with increased confidence among hotel operators and brands, are expected to support an average daily rate-driven RevPAR increase of 5.7 percent in 2016.

“We are currently in that part of the cycle where many would have expected ADR growth to be more impactful,” said Scott D. Berman, principal and U.S. industry leader, hospitality and leisure, PwC. “However, with continued strong lodging demand trends in the U.S., peak occupancy levels, coupled with the absence of this year’s drag on the U.S. dollar, should give hotel operators confidence to continue to drive more room rate growth in 2016.”

]]>http://lodgingmagazine.com/adr-growth-lags-despite-peak-occupancy-levels/feed/0PwC: ADR Growth to Drive RevPAR Through 2016http://lodgingmagazine.com/pwc-adr-growth-to-drive-revpar-through-2016/
http://lodgingmagazine.com/pwc-adr-growth-to-drive-revpar-through-2016/#respondMon, 31 Aug 2015 16:24:25 +0000http://lodgingmagazine.com/?p=20329NEW YORK—An updated lodging forecast released today by PricewaterhouseCoopers U.S. (PwC) expects average daily rate (ADR) to drive revenue per available room (RevPAR) increases in a more meaningful way through the second-half of 2015, and into 2016. Recent performance of the lodging industry has generally met industry expectations, and during the second quarter, ADR growth drove RevPAR increases to a larger degree than in recent quarters. PwC finds that lodging demand trends in the U.S. ...

]]>NEW YORK—An updated lodging forecast released today by PricewaterhouseCoopers U.S. (PwC) expects average daily rate (ADR) to drive revenue per available room (RevPAR) increases in a more meaningful way through the second-half of 2015, and into 2016. Recent performance of the lodging industry has generally met industry expectations, and during the second quarter, ADR growth drove RevPAR increases to a larger degree than in recent quarters.

PwC finds that lodging demand trends in the U.S. have been robust, with both transient and group travel occupancy levels increasing 1.4 percent and 1.5 percent, respectively, during the first-half of the year, contributing to peak occupancy levels for U.S. hotels. PwC expects this positive momentum in demand to continue for the remainder of 2015, supporting a RevPAR increase of 6.9 percent in 2015. In 2016, PwC expects RevPAR to grow 5.9 percent, driven by ADR.

The estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers, LLC in July, and historical statistics supplied by STR and other data providers. Macroeconomic Advisers expects real gross domestic product (GDP) to increase 2.0 percent in 2015, followed by a 2.9 percent increase in 2016, measured on a fourth-quarter-over-fourth-quarter basis.

Based on this analysis and recent demand trends, PwC expects industry occupancy in 2015 to reach levels not seen since 1981, driven by a combination of strong demand momentum and a still-controlled supply environment. As industry occupancy peaks, average daily rate growth is expected to become more meaningful, as the effects of the recent rise in the value of the U.S. dollar wane, giving operators more pricing power, especially in certain gateway markets.

In 2016, supply growth is expected to accelerate to 2.0 percent per this analysis, with the increase in available hotel rooms exceeding, albeit slightly, the long-term average of 1.9 percent for the first time since 2009. As a result, while occupancy levels are expected to begin to stabilize, these peak levels coupled with the absence of this year’s slowdown from the US Dollar is expected to support an average daily rate-driven RevPAR increase of 5.9 percent.

]]>http://lodgingmagazine.com/pwc-adr-growth-to-drive-revpar-through-2016/feed/08 Habits of Effective Hotel Investorshttp://lodgingmagazine.com/8-habits-of-effective-hotel-investors/
http://lodgingmagazine.com/8-habits-of-effective-hotel-investors/#commentsMon, 09 Mar 2015 18:54:38 +0000http://lodgingmagazine.com/?p=17308As investment strategies go, food trucks and graffiti are about as outside the box as you can get, yet these are both part of Jon Bortz’s immediate plans. Innovative property upgrades are integral to his approach in generating outsized returns from his assets. Over the past six years, the CEO of Pebblebrook Hotel Trust has cultivated a high-value portfolio of distinct upscale properties in just about every hot market in the country. “We’re very different ...

]]>As investment strategies go, food trucks and graffiti are about as outside the box as you can get, yet these are both part of Jon Bortz’s immediate plans. Innovative property upgrades are integral to his approach in generating outsized returns from his assets. Over the past six years, the CEO of Pebblebrook Hotel Trust has cultivated a high-value portfolio of distinct upscale properties in just about every hot market in the country. “We’re very different from others investing on the hotel side,” says Bortz. “We put money into places where we can create an experience that’s unique for the customer.” The Bethesda, Md.-based firm’s approach to acquisition and property improvement has also created a unique value proposition for investors.

Bortz established Pebblebrook in 2009 as a blind-pool REIT—meaning it was just a bunch of money with no assets or pipeline—and the company has outperformed other REITs in the hotel space every year since 2012. “We like to buy properties where what we see is not what other people see,” says Bortz. That beauty-in-the-eye-of-the-beholder philosophy dictates much of how Pebblebrook operates and will be on full display later this year when the REIT reopens Vintage Plaza in Portland, Ore.—a renovated property that’s been extensively transformed to reflect local color.

Along with being a place where “weird” is a term of endearment, Portland has a long and rich history of outdoor graffiti. Bortz is looking to tap into that history by decorating the Vintage Plaza’s interiors with street art. “The idea being that if you come to Portland, this is all part of the overall experience,” Bortz says. “And you’ll get a much deeper immersion into the local culture by staying at our property as opposed to somewhere else.”

This same thinking has Bortz considering adding a food truck to Hotel Zephyr, due to open this year in San Francisco, and it has inspired an adult playroom with giant-sized games like Jenga at Hotel Zetta, another Pebblebrook property two miles away. “One of a kind, in people’s eyes, is more valuable than 5,000 of a kind,” Bortz says. While his firm’s approach may seem eccentric, it is guided by a conservative investment strategy that targets upscale full-service hotels in big cities that can be acquired for bargain prices. The REIT’s properties include the Hotel Monaco in Seattle and Washington, D.C.; the Le Meridien Delfina in Los Angeles; the Westin Gaslamp in San Diego; the Sir Francis Drake in San Francisco; the InterContinental Buckhead in Atlanta; and the Affinity Manhattan in New York.

Seeing the potential upside in properties is a key component in the company’s recent winning streak that saw a 31.4 percent growth in earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2014. Adjusted funds from operations (FFO) also grew 38 percent, and adjusted FFO per share improved 24.9 percent. Revenue per available room (RevPAR) was also up 9.2 percent for the year, which outpaced overall industry growth by 11 points.

Pebblebrook’s pristine performance is attributed to its strong fundamentals and the high demand for its properties, which has been stoked by a $57.1 million investment on capital improvements last year. It also helps that the industry is enjoying massive success across the board. REIT stocks are off to a solid start in 2015 as the economy and travel to the United States improve. The good vibes are sourced in accelerating capital markets, favorable supply and demand balances, and strong investor appetites, according to Ernst & Young hospitality forecasts. One particular report, EY’s “Global Hospitality Insights: Top Thoughts for 2015,” states, “The hospitality sector is in a strong position to make even greater leaps in 2015, as fresh capital from new locales increases the number of industry participants and creates an attractive atmosphere for acquisitions.” The report also notes that the impact of hospitality on the global economy is surging. With growth in travel and tourism expected to increase by 3.9 percent this year, the sector will be “increasingly recognized as a key driver of economic growth” at all levels.

With the lodging sector in a healthy stretch that, by all indications, is projected to continue for a few years, hotels are attracting more money than ever before, and much of it is seeking out similar opportunities in prime locations. “Good locations drive revenue, not just in the physical value of the space but also in the overall business climate as well as the local government tax policies and regulations,” says Vesta Hospitality CEO Rick Takach. His management and development firm specializes in turning troubled hotels into successful investments, and finding the diamonds in the rough isn’t as easy as it used to be. Over the next 12 months, competition among investors in high-demand markets is expected to intensify, especially for those who specialized in upscale select service assets. Wise money men like Bortz have found success by looking at investment strategies through a much different prism.

It starts by identifying properties that provide “a good box” to build upon, which includes good room sizes and excellent public areas where designers can get creative by adding amenities, like the Hotel Zetta playroom. The company also recognizes what is important to travelers and places a premium on being on the cutting edge of those demands, like providing technology that lets Zetta guests stream the shows and videos they have on their mobile devices to the flat-screen televisions in each room. “Conservatively, it’s valued at double what we invested in it,” Bortz says. “And that’s because we created something that’s unique in the marketplace.”

Finding the Right Market
Even though it is a major contributor to many firms’ success, creativity alone will only get you so far in the hotel sector. There’s also the matter of managing risk. This is something investors love to worry about. With 35 upscale properties in major cities on both coasts, Pebblebrook’s portfolio is diverse by design. As a public company, it aims to minimize the downside, which is why Bortz says its largest assets represent no more than 7 percent of the company’s EBITDA. This protects a bad performance from overwhelming the rest of its portfolio. Focusing on gateway cities also minimizes risk, since properties can leverage the traditional strength of transient travel in these markets along with growing inbound and group business. That’s where the action is, and big cities also present built-in barriers for some competitors.

“The coastlines tell a story,” says Scott Berman, U.S. Hospitality and Leisure Practice Leader at PricewaterhouseCoopers. “The rest of the country is sort of easy to figure out, but Boston down to Miami and Seattle down to San Diego are so much more complex given the inbound tourism, all the corporate business, and the convention center hubs.” Over the next few years, Berman says he’ll be looking to these coastal markets to see which way the industry is heading. “If we’re sitting here next year and 7.4 RevPAR becomes 5, we’ve got a lot to talk about.”

Performance-wise, these gateway markets aren’t showing any signs of slowing down. “Just look at top 25 markets versus the rest of the country,” says Berman. “In the last four years, there’s been about a three to four point delta in RevPAR between top 25 and the rest of the country.”

]]>http://lodgingmagazine.com/8-habits-of-effective-hotel-investors/feed/1Here’s What’s Driving Lodging’s Blockbuster Yearhttp://lodgingmagazine.com/heres-whats-driving-lodgings-blockbuster-year/
http://lodgingmagazine.com/heres-whats-driving-lodgings-blockbuster-year/#commentsMon, 12 Jan 2015 18:00:23 +0000http://lodgingmagazine.com/?p=16150There may not be a better time than right now to own and operate a hotel. That’s according to three industry analysts we asked to explain what’s driving lodging’s blockbuster year. SCOTT BERMAN U.S. Hospitality and Leisure Practice Leader, PricewaterhouseCoopers WHAT HAPPENED TO THE LODGING INDUSTRY LAST YEAR? If we rewind the clock 12 months, our forecasts would have illustrated that the industry was moving along at about a 6 percent RevPAR growth and this ...

WHAT HAPPENED TO THE LODGING INDUSTRY LAST YEAR? If we rewind the clock 12 months, our forecasts would have illustrated that the industry was moving along at about a 6 percent RevPAR growth and this would continue through 2014. Group business was still lagging, there was still choppiness in some of the key markets like Washington, D.C., the secondary and tertiary markets were re-bounding but not robust. If you look at it now, I would say the industry completely missed the boat. That 6 percent forecast became an 8 percent RevPAR growth last year.

And that is largely due to the intensity and robustness of the group segment, the top commercial markets performing better than expected, and the heart of the country doing much better. And supply continues to be muted in all of the chain scales except right in the middle. So it’s really a good news story that the industry has done much better than the pundits expected.

SO DID THE INDUSTRY MISS THE BOAT IN RAISING RATES THIS YEAR? Growth came from both room rate and demand, which was surprising. The rate piece is what we got right, but it’s the demand piece that made the difference. With groups now signing contracts, 2015 should be the year of real rate growth and the burden is on the operators to do what they are contracted to do.

Of course, growth will change from market to market, but the good news for operators is that having the group bill back gives them more leverage because they have less inventory, and that road warrior piece that core corporate business needs those room blocks.

WERE THERE PARTICULAR MARKETS THAT SURPRISED YOU WITH HOW THEY PERFORMED LAST YEAR? Clearly those markets that had major convention facilities have been beneficiaries of group business. So Orlando, Philadelphia, and San Diego have all done better than expected. The easy answer is to say New York City because of its significant supply growth, but Miami is the biggest surprise for me. Given what hotels there are trading at and their ability to induce demand and grow rates, it’s almost the perfect story. And it’s fueling investment into South Beach and the whole regeneration of the downtown market. Miami is in the top five in room rate. That has historically never occurred.

ANY OTHER SURPRISES? Yes, the rebirth of resorts. In a healthy economy with stronger group penetration and the need by the operators for resort inventory to fulfill customer redemptions, there is all of a sudden a shortage of resort inventory. Obviously, markets like Miami, Orlando, California, and Hawaii are beneficiaries as are the Caribbean and Mexico. It was only three years ago that resorts were the absolute least favored mar-ket segment by owners and operators. Now resorts are being renovated and restored. A good example is what Playa and Hyatt are doing with the 13 resorts that will be branded by Hyatt and operated by Playa. Within the next two years there will be a couple thou-sand rooms of resort inventory and a new brand promoting an inclusive product. Inclusive is not new, but it is new to being part of a U.S. brand portfolio. It’s really a code for packaging—essentially a cruise ship on land.

LOOKING AHEAD, WHEN DO YOU SEE NEW SUPPLY BECOMING A CONCERN? Based on past cycles, there’s no question that competition is the Achilles of this business. I wouldn’t say it’s a concern yet, but we’re starting to see 3 to 5 percent supply growth in some places. That’s usually the key indicator that growth could impact those markets. Still, in a strong economy we haven’t seen much fallout from new supply. The one market where you do see rate pressure is New York City, where rates are growing at 3 or 4 per-cent not 6 or 7. So you really have to look at it market by market. You can’t make generic statements about the whole country.

I will say that the coastal markets, from Boston down to Miami, Seattle down to San Diego, continue to be important in terms of capturing both leisure and corporate business from inbound travelers—Asia to the Pacific, Europe and the Middle East to the East Coast. As the brands expand their footprints overseas, they’ll capture more inbound business from travelers familiar with North American brands.

HOW WILL LOW GAS PRICES IMPACT THE LODGING INDUSTRY THIS YEAR? We have not analyzed anything, so my comment is strictly intuitive. But if we look at other cycles as leading indicators, lower fuel prices help lodging overall and have historically benefited select service and economy properties more than others because, psychologically, people want to travel and drive more when they have more money. We certainly know that when fuel prices have risen, these types of proper-ties have been the most impacted negatively.

MARK WOODWORTHPresident , PKF Hospitality Research

WHAT HAPPENED IN 2014? A year ago, we were measurably more optimistic than anybody else with respect to what was going to happen. We thought the net supply change last year would be a 1.2 percent, and it looks like it’s going to be more like a 0.9 percent. One of my takes on this change is that new development is coming back at a slower pace than what the underlying industry fundamentals would suggest. Conversely, the level of demand growth this year was higher than we had forecast, and the return of the customer is now happening at a faster rate than the underlying fundamentals would suggest the level growth to be.

HOW DOES THIS FACTOR INTO THIS YEAR’S FORECAST? What’s interesting is how average daily rate grew exactly at the rate we had expected it to grow last year. Having rate catch up to where we thought it should be is an important indicator of where we are in the cycle. It reinforces the notion that the fundamentals are extremely solid, and there’s nothing that we see out there that causes us any concerns through 2017. It’s going to be a very robust protracted period of good times for virtually all U.S. lodging industry participants.

WHAT’S DRIVING YOUR REVPAR FORECAST FOR THIS YEAR? In the early part of the recovery, we saw demand being driven by increases in corporate profits and increases in real personal income levels, both of which manifested in a quicker recovery for upper priced hotels. Now with job growth finally kicking in— four months of plus 200,000 jobs being created—and being sustained, we’re seeing lower priced properties really beginning to drive occupancy and increase rates.

And while prices have gone up a lot on a relative basis, they’re still very attractive. The year-end national ADR for 2014 is $115.62. If you look at these rate levels relative to what they were before the great recession six years ago, it’s not that much. The pre-recession peak was $107.40 in 2008, and it’s only up 7.6 percent since then. That’s a nominal price in real terms.

ARE THE PROJECTIONS EQUALLY ROSY ACROSS ALL U.S. MARKETS? No, but another benefit of rising employment is that it’s no longer just the gateway cities or tech centers that are growing; we’re starting to see it more in the Mid-west and secondary markets. Now we’re seeing high employment cities that aren’t falling into the high demand growth mar-kets. Austin is a good example of this. The reason demand has not grown as much in a high employment market like Austin is occupancy levels are so high that the hotels are basically full. It’s another way of looking at the industry and understand-ing that the strength of the fundamentals is very positive not only at the national level but also in many of the key markets around the country.

WHAT IS THIS YEAR LOOKING LIKE? The RevPAR growth we’re forecasting is pretty close across all chain scales. The higher priced ones are largely generating this growth from room rate, whereas the lower priced segments will be closer to a 50/50 mix of occupancy growth and ADR growth. If we’re right in our forecast, then it’s going to be good for all but really, really good for luxury, upper-upscale, and upscale properties.

HOW MIGHT LOW OIL PRICES IMPACT HOTEL MARKETS NEXT YEAR? There is no doubt in our minds that a low oil price environment is positive for most markets, though we know from past cycles that the low prices have to sustain themselves for some time before consumers begin to actually change their behavior.

But markets where oil related industry is a meaningful part of their GDP are going to feel it. We think it’s going to be mitigated to a meaningful degree because of the economic diversity of traditional energy markets. If you look at what drives the economies in places like Houston or Dallas today versus what we saw 30 years ago, these areas are much less dependent on energy production. But if I’m in northern and western Pennsylvania, or if I’m in the Dakotas, then yeah, I’m not feeling too good right now.

JAN FRIETAGSenior VP, Strategic Development, STR

LAST YEAR, WERE THERE ANY MARKETS THAT SURPRISED YOU PERFORMANCE-WISE? We track 162 markets across the United States and what’s interesting to note is that for the 10-month year-to-date RevPAR percent change, only one market was negative. Rochester had a 1.7 percent drop in RevPAR. I can assume that the area is experiencing a continued flight of industries. But otherwise I was pleasantly surprised by all the positive RevPAR growth.

WHAT DO YOU THINK IS DRIVING THAT? It had to do with the demand increase from business and leisure transients as well as from groups. The transient side, interestingly, never went away during the great recession. Yes, we sold a few more transient rooms, but overall that stayed fairly healthy. The group side is what got hit hard. That is now coming back and firing on all cylinders.

WHAT ARE STR’S PROJECTIONS FOR THIS YEAR? Basically, more of the same, limited new supply —we’re expecting 1.3 percent supply growth. Demand is going to continue to grow—and that’s on top of a 66 percent occupancy. We’re forecasting that occupancy will be higher than it has ever been in the 25 years I’ve been tracking the industry, which is just incredible. Demand is up, supply is up a little bit. That means that occupancies continue to grow 1.1 percent or so.

What comes with that occupancy of 66 percent is pricing power—you know, compression nights. Hotels are full, and they can then charge higher rates. That’s really positive, and we expect it to last for the foreseeable future.

Now the question is, will hoteliers take advantage of the highest nationwide occupancies ever and price accordingly? Is the influx of new limited-service rooms going to put pressure on markets across the board and have a dampening effect on room rate increases? If you ask me next year, I could tell you. Right now, we think that 5 percent is doable. And if you add in the 1.1 percent occupancy growth, you get a 6.2 percent increase in RevPAR this year.

Looking at the industry, we’re expecting that the supply growth numbers are going to accelerate in late 2015 and 2016, and in 2017, and so forth. For now, this is arguably the best supply-demand environment that we will see in our generation. If you’re looking for a good time to be in the industry, 2015 will be it.

]]>http://lodgingmagazine.com/heres-whats-driving-lodgings-blockbuster-year/feed/1PwC: Room Rate Gains to Accelerate in 2015http://lodgingmagazine.com/pwc-room-rate-gains-to-accelerate-in-2015/
http://lodgingmagazine.com/pwc-room-rate-gains-to-accelerate-in-2015/#respondMon, 10 Nov 2014 16:25:17 +0000http://lodgingmagazine.com/?p=15205NEW YORK—An updated lodging forecast released today by PwC US anticipates room rate gains to accelerate and drive a revenue per available room (RevPAR) increase in 2015, as hotels achieve occupancy levels reflecting the solid lodging demand trends of recent quarters. During the first nine months of 2014, both individual and group travel exhibited solid momentum, with the year-over-year pace of recovery in group demand outpacing the individual transient segment. Increased momentum of group demand ...

]]>NEW YORK—An updated lodging forecast released today by PwC US anticipates room rate gains to accelerate and drive a revenue per available room (RevPAR) increase in 2015, as hotels achieve occupancy levels reflecting the solid lodging demand trends of recent quarters. During the first nine months of 2014, both individual and group travel exhibited solid momentum, with the year-over-year pace of recovery in group demand outpacing the individual transient segment.

Increased momentum of group demand growth during the third quarter of 2014 is expected to continue in the fourth quarter and into 2015. Lodging operators are reporting solid momentum in group pace for 2015. The strong outlook for group demand, coupled with continued strong transient travel activity and a positive economic environment is expected to drive a solid 8.2 percent increase in RevPAR this year. In 2015, supply growth is expected to accelerate, resulting in moderating growth in occupancy. Still, industry-wide occupancy levels are expected to reach 64.9 percent, the highest since 1984, providing hotel operators with leverage to drive more aggressive pricing.

The estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers LLC in October and historical statistics supplied by STR and other data providers. Macroeconomic Advisers expects real gross domestic product to increase 2.2 percent in 2014, and accelerate to 2.8 percent growth in 2015, measured on a fourth-quarter-over-fourth-quarter basis.

Based on this analysis and recent demand trends, PwC expects lodging demand in 2014 to increase 4.3 percent, which combined with still-restrained supply growth of 0.9 percent, is anticipated to boost occupancy levels to 64.2 percent. PwC’s outlook expects accelerating supply growth of 1.4 percent in 2015, as construction of new hotels gathers momentum (up approximately 40 percent in the third quarter, compared to the same quarter last year). Occupancy levels in the lower-priced chain scale segments are expected to approach or exceed prior peak levels, as price-driven compression from higher-priced hotels drives demand to lower priced hotels.

“Group demand improved significantly in the third quarter, leading to stronger-than-expected occupancy levels,” said Scott D. Berman, principal and U.S. industry leader, hospitality and leisure, PwC. “Despite an evolving supply pipeline, industry demand trends are expected to remain robust, giving confidence to the operating community to drive room rates higher in 2015.”

]]>http://lodgingmagazine.com/pwc-room-rate-gains-to-accelerate-in-2015/feed/0Group Bookings to Drive Highest Occupancy Levels in 20 Yearshttp://lodgingmagazine.com/group-bookings-to-drive-highest-occupancy-levels-in-20-years/
http://lodgingmagazine.com/group-bookings-to-drive-highest-occupancy-levels-in-20-years/#respondMon, 25 Aug 2014 17:30:07 +0000http://lodgingmagazine.com/?p=13699NEW YORK—An updated lodging forecast released today by PwC US anticipates stronger occupancy gains in 2014, setting the stage for 2015, during which PwC US anticipates the highest occupancy levels in 20 years. As the economy rebounded from a weather-related slowdown in the first quarter of 2014, travel activity picked up significantly in the second quarter, resulting in better than expected occupancy performance, and average daily rate results that were only slightly less than anticipated. ...

]]>NEW YORK—An updated lodging forecast released today by PwC US anticipates stronger occupancy gains in 2014, setting the stage for 2015, during which PwC US anticipates the highest occupancy levels in 20 years.

As the economy rebounded from a weather-related slowdown in the first quarter of 2014, travel activity picked up significantly in the second quarter, resulting in better than expected occupancy performance, and average daily rate results that were only slightly less than anticipated.

While transient travel—both commercial and leisure—continues to show steady gains, hoteliers are reporting strong trends in the group segment, which still has room to recover to peak levels. This increased momentum of demand growth in the second quarter and a robust summer travel season also resulted in public lodging companies increasing their guidance on revenue per available room (RevPAR) growth for the year. This, coupled with continued growth in group demand and steady above-trend economic momentum, supports PwC’s expectation of a solid 7.6 percent RevPAR increase in 2014.

In 2015, supply growth is expected to accelerate, resulting in decelerating occupancy growth. Still, industry-wide occupancy levels are expected to reach 64.8 percent in 2015, the highest since 1995, giving hotel operators more confidence to push for higher room rates.

The updated estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers LLC in August and historical statistics supplied by Smith Travel Research and other data providers. Macroeconomic Advisers expects real gross domestic product (GDP) to increase 2 percent in 2014, and accelerate to 3.1 percent growth in 2015, measured on a fourth-quarter-over-fourth-quarter basis.

Based on this analysis, PwC expects lodging demand in 2014 to increase 4 percent, which combined with still-restrained supply growth of 1 percent, is anticipated to boost occupancy levels to 64.1 percent. PwC’s outlook expects accelerating supply growth of 1.6 percent in 2015, as construction of new hotels gathers momentum (up over 50 percent in the second quarter, compared to the same quarter last year), with supply growth in the higher-priced chain scale segments outpacing growth in the lower-priced segments. Occupancy levels in the lower-priced chain scale segments are expected to approach or exceed prior peak levels, as price-driven compression from higher-priced hotels drives demand to lower priced hotels.

“The strengthening of the group segment thus far in 2014 and a strong summer travel season across all price points is encouraging for future occupancy levels and continued industry growth,” said Scott D. Berman, principal and U.S. industry leader, hospitality and leisure, PwC. “We will be closely monitoring the industry’s third quarter results to evaluate any change in momentum.”

]]>http://lodgingmagazine.com/group-bookings-to-drive-highest-occupancy-levels-in-20-years/feed/0Recovery Accelerates with Strong Growth in Group Demandhttp://lodgingmagazine.com/lodging-recovery-accelerates-with-strong-growth-in-group-demand/
http://lodgingmagazine.com/lodging-recovery-accelerates-with-strong-growth-in-group-demand/#respondMon, 19 May 2014 17:12:18 +0000http://lodgingmagazine.com/?p=11654NEW YORK—An updated lodging forecast released by PwC US anticipates lodging recovery will enter a new phase, with continued strengthening in group demand and rebounding economic momentum supporting a solid 6.5 percent RevPAR growth in 2014. Despite a weak first quarter for the U.S. economy, the lodging industry’s performance was above overall industry expectations led by a strengthening recovery in meetings, conferences, and other related kinds of group demand. In 2015, as supply growth accelerates, ...

]]>NEW YORK—An updated lodging forecast released by PwC US anticipates lodging recovery will enter a new phase, with continued strengthening in group demand and rebounding economic momentum supporting a solid 6.5 percent RevPAR growth in 2014. Despite a weak first quarter for the U.S. economy, the lodging industry’s performance was above overall industry expectations led by a strengthening recovery in meetings, conferences, and other related kinds of group demand. In 2015, as supply growth accelerates, occupancy growth is expected to moderate to 1.3 percent. However, as many hotels reach occupancy constraints more frequently, pricing power is expected to accelerate, resulting in a robust 5.1 percent growth in average daily room rates and 6.4 percent increase in RevPAR.

The updated estimates from PwC are based on a quarterly econometric analysis of the lodging sector, using an updated forecast released by Macroeconomic Advisers LLC in May and historical statistics supplied by Smith Travel Research and other data providers. Macroeconomic Advisers expects real gross domestic product to increase 2.6 percent in 2014, and accelerate to 3.3 percent growth in 2015, measured on a fourth-quarter-over-fourth-quarter basis.

PwC’s updated lodging outlook incorporates a stronger macroeconomic context, after a weak first quarter, and recent hotel performance, which shows strong recovery in demand, driven most recently by the group segment. Based on this analysis, PwC expects lodging demand in 2014 to increase 3.1 percent, which combined with still-restrained supply growth of 1 percent, is anticipated to boost occupancy levels to 63.5 percent, highest since 1997. PwC’s outlook for supply expects accelerating supply growth of 1.3 percent in 2015, as construction of new hotels gathers momentum (up 44.5 percent in the first quarter, compared to the same quarter last year). The lodging cycle has entered a new phase, with RevPAR recovery now beginning to percolate down to lower priced chain-scale segments, as hotels in the higher priced segments implement revenue management strategies to manage a stronger-than-expected recovery in group demand. In particular, upper midscale hotels are on track to surpass peak occupancy levels in 2015, while hotels in the midscale and economy chain-scale segments are anticipated to approach their prior peak occupancy levels.

“Recent strength in operating performance, despite economic challenges in Q1, has reaffirmed the underlying strength of the U.S. lodging sector” said Scott D. Berman, principal and U.S. industry leader, hospitality and leisure, PwC. “With the recovery in group demand accelerating, hotel operators at the higher price points are poised to benefit.”